RETIREMENT
“ If an advisor who began in the business [ using commissions ] with an insurance company , broker-dealer or wirehouse firm , and then , years later , decided to become a fee-only advisor , they may have an insurmountable hurdle ” transitioning their book into their new fee-only model , says Jason Branning of Branning Wealth Management in Jackson , Miss . or assigned to someone else . “ If a careerchanger has dropped all methods of collecting new commissions , they still need to meet the trailing commissions rules ,” Branning says .
Another option is to help clients convert their old , commission-based annuities into new zero-commission models . Under Section 1035 of the Internal Revenue Service code , any a tax-free exchange to a commissionfree product ,” says Ross McGoodwin , a regional vice president at DPL . “ Modern ” annuities , he says , “ often deliver superior cost structure , lifetime payout rates , upside potential on fixed solutions , and liquidity . The benefits are numerous .”
These conversions , he notes , also give advisors a recurring fee on the new asset . “ This is a true win-win that advisors need to be aware of ,” he says .
“ Many advisors I work with are shocked by how many of these contracts can be improved immediately through a tax-free exchange to a commission-free product .”
— Ross McGoodwin
The National Association of Personal Financial Advisors , he says , will allow newly designated fee-only advisors to collect up to $ 2,500 per year in trailing commissions from legacy products . But if the commissions are higher , he says , they must be forfeited , given to charity , nonqualified annuity — meaning one that was funded with after-tax dollars — can be traded for another nonqualified annuity without generating taxes .
“ Many advisors I work with are shocked by how many of these contracts can be improved immediately through
Don ’ t Give Up Despite the many obstacles , many advisors continue to like annuities .
“ Most firms feature annuities as a normal part of their client retirement strategies ,” says Mike Maghini , head of national accounts at Security Benefit . “ They offer a way to help de-risk portfolios .”
Some go even farther . “ In my mind , you cannot be acting in a client ’ s best interest if you are not knowledgeable about annuities and present them as options ,” says DPL ’ s Lau .
Technology & Ops continued from page 33
Waltrich says about 75 % to 80 % of the platform ’ s content production is handled by AI , with professional editors and writers then stepping in to refine the work and make it ready to publish .
Hecker believes AI can best be used to help advisors and clients prioritize where to spend their time , both when it comes
“ We as an industry struggle at the supply side of human advice ,” Hecker says . “ We all can and must serve more clients ; the only way to do that is by using more , better and smarter technology . That ’ s the force multiplier and leverage point .”
Never Fear
Some advisors look at this technology the same way they looked at roboadvisors before — questioning whether
Hecker believes AI can best be used to help advisors and clients prioritize where to spend their time .
to money moves like saving , spending and investing , and when it comes to practice management . AI may also help increase the loading ratios — the number of clients per advisor — at some firms . a more intuitive and behaviorally responsive AI could displace advisors . But technologists , in general , believe that will never be the case .
“ There is no world where AI can replace a human financial advisor ,” says Malhotra . What he sees instead is a future where AI could help in interactions that are purely transactional , where human interaction isn ’ t necessary .
While generative AI , like the roboadvisors , may help an advisor refine their value proposition — perhaps helping the advisor manage human behaviors and relationships rather than managing actual money , the technology is still incapable of filling an advisor ’ s shoes , Hecker says .
“ Net-net , I view it as a much-welcome and much-needed force-multiplier that makes us human advisors even more human , even more often ,” Hecker says . “ The general trend will continue of pushing humans up higher in the value chain . The next phase of evolution could entail the human advisor focusing even more on behavioral dynamics and the convergence of health , wealth and family .”
54 | FINANCIAL ADVISOR MAGAZINE | NOVEMBER 2023 WWW . FA-MAG . COM